Consequences of Credit Card Default

Please answer our four questions relating to credit card default and its consequences.

We have 4 questions about our credit card debt and its impact on our credit score:

  1. If you fail to pay your credit card bills, what are the consequences and how long will your credit score be affected?
  2. If you file for bankruptcy, are there ways to speed up the recovery of your credit score?
  3. Does it matter/help if you have one credit card for say, $100,000 or 10 credit cards with $10,000 balances, in terms of debt consolidation and consequences of not paying them?
  4. In terms of long-term consequences (credit score, ability to get credit, employment, etc), which bankruptcy hurts you the most? What about bankruptcy vs. foreclosure?

Thank you for any advice!

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Bill's Answer
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Highlights


  • Review how an account moves to charge-off status.
  • Examine the debt collection process.
  • Understand ways you can rebuild your credit.

I answer your four questions about the consequences of defaulting on a credit card debt below.

1. Charge-Off

As with most consumer debts, failing to make payments on your credit card accounts in a timely manner will likely result in the lenders reporting late payments to the major U.S. consumer credit reporting agencies — Experian, Equifax, and TransUnion. After receiving no payment for 6-8 months, the creditors will be required to “charge off” the debts, meaning that they must remove the debt from their “accounts receivable” books; a charge-off does not mean that you are not liable for the debt, only that the creditor. Charge-offs will appear as derogatory items on your credit reports, and will likely cause a significant reduction in your credit score. To read more about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com at Credit Information & Resources page.

Collections

While the credit problems associated with financial hardship are an issue for consumers who are planning to make a large purchase in the near future, the more immediate consequence experienced by most consumers are the collection activities undertaken by many creditors. You will likely receive collection calls and letters from the creditor directly. If you are still unable to pay the debt after several months, the creditor is likely to refer the account to a third-party collection agency.

Third-party collectors are known to be much more aggressive in their collection tactics than original creditors, so do not be surprised if the calls become more persistent, or even threatening. Thankfully, federal law, the Fair Debt Collections Practices Act, requires third-party debt collectors to stop calling you if you send a written demand to cease communication. You can find an example cease communication demand letter at the Bills.com Debt Do-it-yourself page.

Quick Tip

The Bills.com Debt Coach tool can give you no-nonsense advice about your debt resolution options, including the cost and time to debt freed for each option.

Judgments

In some cases, when all other collection efforts fail, a creditor will decide to file a lawsuit against a consumer for his or her unpaid credit card account. In my experience, only a small percentage of delinquent accounts end up in litigation, but it is a possibility about which you should be aware. If one of your creditors sues you, the court will likely issue a judgment in the creditor’s favor. Depending on your state’s laws regarding the enforcement of judgments, the creditor may be able to garnish your wages, levy your bank accounts, or take other action to enforce its judgment.

Most delinquent consumer debts do not result in litigation, so you should not be overly concerned, but if a creditor does file a lawsuit against you, you may need to consider establishing a repayment plan, or even filing for bankruptcy protection, to prevent further enforcement action.

2. Rebuilding Credit

If you decide to file for bankruptcy protection, the case will appear on your credit reports for ten years from the date of filing, and will likely cause significant damage to your credit rating, especially for the first few years after filing. As time passes, credit scoring models and most lenders give less weight to older derogatory items in favor of newer positive trade lines when reviewing a consumer’s credit history. You need new credit lines so you can establish positive payment history to counterbalance the negative impact of your bankruptcy filing. Establishing a positive payment history can be difficult for people who have had past credit problems, especially those forced to file for bankruptcy protection.

Consider two options. First, if you know someone with an established credit history who will co-sign a loan with you, you may be able to obtain a loan and start building your credit.

Second, if you cannot find someone to co-sign an unsecured loan, apply for a secured credit card. Secured credit cards require you to deposit cash in an account with the credit card issuer. The credit line available on the card is equal to the amount of cash on deposit. This may sound strange; why not just spend your own cash? Secured credit cards report timely payments to the credit bureaus, which helps establish a positive credit history. To read more about bankruptcy, and the alternatives available to consumers, visit the Bills.com debt help page.

3. Credit Score Impact

From a credit score perspective, it is better to default on one large account than defaulting on many small accounts. Although the large account would carry a heavy weight, the many small delinquencies cause more damage than one big delinquency. But that's not the total picture. As for debt settlement programs, generally the opposite is true — the more accounts you have, the more flexibility the debt servicing company has in negotiating with your creditors. If you have only one account, if the creditor is unwilling to negotiate, the whole strategy is a bust. However, if you have multiple creditors, one or two creditors’ refusal to cooperate will not defeat the plan as a whole.

4. Bankruptcy

Both types of bankruptcy (Chapter 7 and Chapter 13), as well as foreclosure actions, are viewed as serious derogatory items on consumer credit histories. I cannot say that one is “worse” than the other, as each has its own serious consequences. However, I can tell you that a foreclosure action is often more costly for consumers; in addition, many consumers find that they must file for bankruptcy after foreclosure to prevent further collection action by their mortgage lender.

Editor's note

When we wrote this answer originally, we knew a lot less about the impact negative events have on a credit score than we do now. See the Bills.com article Short Sale, Foreclosure & Your Credit Score to learn more.

If you face foreclosure and/or considering filing for bankruptcy protection, I strongly encourage you to consult with an attorney in your area to discuss your financial difficulties. Your attorney will review the details of your situation and help you decide what actions are appropriate for you and your family.

I wish you the best of luck in resolving the financial problems you are facing.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

175 Comments

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  • 35x35
    Feb, 2013
    BA
    I recently had a $1250 credit card charge default. I have moved and am job searching and am unable to make payments. What are the best options? Should I send a cease and desist letter to third party agencies and contact them when I am able to make a payment or what?
    0 Votes

    • 35x35
      Feb, 2013
      Bill
      It is unclear where you are in time regarding your credit card debt. Here are your options:
      • Newly delinquent: You are one or two months behind in payments. If this describes you, talk to your credit card issuer about its hardship program. Credit card issuers do not discuss these plans, and are no obligation to offer these plans. Ask a customer service representative if one is available, and if so, whether you qualify based on your payment history and circumstances.
      • Delinquent less than ~180 days: If this describes you, ask the credit card issuer if you still qualify for a hardship program.
      • Delinquent more than about 180 days but less than your state's statute of limitations for breach of contact: Start negotiating a settlement to your debt. Follow the link I just mentioned to learn how.
      • Your delinquency exceeds your state's statute of limitations for breach of contract: The clock on your state's statute of limitations starts running when you miss your first payment. If the clock for this debt has run out in your state, the original creditor or its collection agent can still file a lawsuit against you to collect the debt (in most states). If it does so, you must file a motion with the court to assert a statute of limitations defense. Because you have this defense available, you might as well send the collector a cease communications notice to stop it from contacting you.

      You mentioned a $1,250 debt. Most debt settlement and credit card counseling providers will not accept you for such a small (relatively speaking) debt amount. Therefore, arm yourself with information by following the links I mentioned above, and take the action appropriate to where you are in the collection cycle.

      0 Votes

  • 35x35
    Nov, 2012
    Kyle
    I have a credit card that I let a friend use to buy furniture. I had him sign a contract stating that he was liable for the loan. I am now getting calls from a collection agency because he defaulted therefore I defaulted on this loan. I realize the letting him use my credit was not a smart move on my part but now I am concerned with what this is going to do to me. I am currently looking for full time work, have student loans that I am paying on and also have a credit card that I am paying on. I am wondering if there is any recourse that I have.
    0 Votes

    • 35x35
      Nov, 2012
      Bill
      You can try to work out a payment plan or a reduced-balance settlement with the collection agency, to prevent things from degrading into a lawsuit.

      Separately, you could try to take action against your friend, for not honoring the agreement the two of you had.
      0 Votes

  • 35x35
    Aug, 2012
    Sara
    I have a credit card with $10500 debt on it. I currently make payments as I can but can hardly do so and live day to day and am continuously unable to pay it down and continue to incur interest. What will happen if I default and how do I go about that?
    0 Votes

    • 35x35
      Aug, 2012
      Bill
      Sara, you should work hard to avoid default. First, speak directly with your creditors, to see if they will work with you. Maybe one or more will put you into a temporary hardship program with reduced interest or monthly payment. Two, look into both debt settlement programs and credit counseling programs. If neither of those options is right for you, speak with a bankruptcy attorney and also learn what the collection laws are in your state.
      0 Votes

  • 35x35
    Jul, 2012
    River
    I had to stop my credit card payments 4 yrs ago. Currently, I am working for minimum wage. My employer processes its payroll though the same bank where I defaulted 4 yrs ago. My question is, can that bank hold my paycheck if I try to deposit my paycheck to my account or if I cash it in western union?
    0 Votes

    • 35x35
      Jul, 2012
      Bill
      The bank may not intercept a payroll check in the manner you described. I suggest you have your payroll check direct-deposited into an account you open at a local bank or credit union, which is separate from your employer's bank.
      0 Votes

  • 35x35
    Apr, 2012
    Brinna
    I just recently had a child and husband has lost his job. I currently have a credit card of about $10,000. I also have a line of unsecured credit for another $10,000 from the same bank. I have been in great standing up until now, but I need to default. There is no way I can keep up. I do have another credit card (different place) that is more manageable $1,000. What is the process and consequences of my actions. Will they come for my home, car, wages? I am located in North Carolina, but cc originated in AL...line of credit in NC? Please help!
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      Two reading assignments for you, both of which will answer your questions and give you additional background information and ideas for resolving your debt:

      One last thought: Try the Bills.com Debt Coach, which is a no-cost, no-obligation, no-nonsense analysis of your debts. After you enter your debts into the tool, Debt Coach calculates the costs and benefits of each debt resolution strategy available to you.

      0 Votes

  • 35x35
    Apr, 2012
    Sultan
    Hi and thank you for the valuable info. I defaulted on all of my credit card payments. I am not a US citizen, I am moved here because of wife and kids (US citizens). I have been unable to get a job despite my 22 years of experience as an IT Senior Manager in the Middle East. My question is; what will happen to me if creditors file legal actions against me? Will I get deported? I have been thinking about going back where it will be easier to get a job and help pay my bills.
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      It is not a crime to not pay your credit card bills in the US. I have not heard of a case where a resident-alien was deported for an unpaid debt. To the contrary, creditors want people with delinquent accounts to remain in the US so creditors can find them and collect from them. Creditors have the right to file civil lawsuits against delinquent borrowers. Civil matters do not involve immigration officials.

      See the Bills.com resource Collections Advice to learn more about your rights and liabilities.
      0 Votes

  • 35x35
    Mar, 2012
    Mike
    Bill, Maybe you can help me out with a little clarification! I had a judgment entered against me in NJ in 11/2006 for $2800 for an unpaid credit card, and I forgot about it until recently, when I had my credit report run because I am looking into purchasing a home. The judgement is currently unsatisfied. If I understand correctly, unless the judgment is renewed by the creditor it is due to fall off the report in a year and 1/2, but will the judgment will still be in existence even if it is not on the credit report? If so, I would imagine the mortgage company would not write a mortgage due to the possibility of the judgment occupying the 1st lien. Also, if I were to pay off the judgement now, would it reset the time that it will be staying on my credit report? I.e., will the date reset from 11/2006 to today, and then remain on my report for the subsequent 7 years?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      Think of a credit report as a specialized newspaper. Just because an event does not appear in a newspaper does not mean the even did not occur. Let me put this another way: A credit report is not a legal ledger that contains a person's complete list of legal and financial obligations. Sometimes, a credit report will contain erroneous information about a debt the person does not owe. Other times, a credit report will not contain a large debt the creditor never got around to reporting. Therefore, do not consider a credit report for anything other than it was intended — a tool used for potential creditors to make a guess about a consumer's creditworthiness.

      Judgments appear on a credit report for 7½ years from the date the judgment was entered, or the length of the judgment, whichever is longer. The date the judgment was paid is irrelevant for the purposes of determining how long the judgment appears on a credit report. In other words, your paying the judgment will not reset the clock.
      0 Votes

  • 35x35
    Mar, 2012
    jr
    I had an account that was charged off and went to collections in 2009. I settled with the collections agency and paid the account as agreed in 2010. I have a letter from the collections agency that the account was settled and satisfied. 2 years later, the original creditor is still reporting that I am 30 days late every month for the past 2 years. Is this legal for them to do? What can I do to fix this problem?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      Dispute the incorrect derogatory entry on your credit report. Make copies of the documents showing you paid the debt, and include those with your dispute letter. The hyperlink I just mentioned shows how to file a dispute.
      0 Votes

    • 35x35
      Mar, 2012
      Mike
      Just wanted to thank you for all this information, I am currently staying on top of things, but I am looking at a possible career change, have 3 kids and I'm a single father. I want to make sure as much of my assets are used to help my kids with college & life. Your page has answered a lot of questions and I know where I will look in the future if issues arise. Thanks Mike
      0 Votes

  • 35x35
    Feb, 2012
    Mark
    I have a large credit card debt with 2 cards. Chase and Barclays. Total $17000. I just stopped work due to medical stuff and am now only collecting Social Security. I want and need to default on them. I am wondering how defaulting on these 2 cards will effect 2 other credit cards I have that are in good standing. One, a Visa with a local credit union and American Express card. Will these cards be effected in any way. i would like to keep them.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      The Credit Card Act of 2009 banned creditors from using what was called "universal default," where a default on one card gave your other creditors cause to hike your interest rate on your cards with them, even if they were in good standing. Now, your two creditors for your cards not in default, American Express and the Credit Union, are prohibited from raising your interest rates due to your problems with Chase and Barclays. I believe they could choose to cut your credit limit, if they so choose.
      0 Votes

  • 35x35
    Jan, 2012
    Luis
    I'm 59 and unemployed one year now and receiving unemployment benefits, part of which have been used to pay credit card debt for which I've never been late. I have eight credit cards in my personal name. Two have no balance, two I pay off the entire balance monthly (groceries, gas, etc), and the remaining four have a combined debt of $80k. I'm delinquent on my home mortgage since losing my job, and am in the final stage of a short sale closing. My car is paid off and I'll be looking to be able to rent a small place. I have decided not to continue making the monthly payments on the remaining four credit cards ($80k) since I'm critically low in my savings account. Should I close any of these credit card accounts, or leave some, or all, open? Regarding the four remaining credit cards ($80k), which following procedure will affect my credit rating less: Chapter 7, or, tolerating years of incessant creditor persecution?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      It sounds like your credit score has already been seriously damaged by being delinquent on your mortgage and your credit cards. The short sale will also adversely affect your ability to receive new credit. However, your problem does not seem to be your credit score. The biggest problem is the large amount of unsecured debt that you have accumulated. Your creditors will not just bother you, but they will take real action, which can lead to a court judgment and then wage garnishments, liens on your personal property and bank levies.

      Debt settlement could be a viable alternative, but only if you can afford the monthly payment that the program requires. Bankruptcy may be the best alternative, especially if, in addition to the 80K in unsecured debt, you are left with a deficiency balance on the mortgage, post-short sale.

      I recommend that you read the Bills.com article about debt relief and get a no-cost, no obligation analysis of your debt options from a pre-screened debt relief provider. Speak with a bankruptcy attorney, as well.
      0 Votes

  • 35x35
    Dec, 2011
    Peggy
    I really need the help. I have worked hard and expected to retire at the same job that I had started at 21, but in my 40's an unexpected injury has made it impossible for me to work. I have filed my disability, but I have no income and my family supports me. I have defaulted on my credit cards and there will a judgement against me in one as of this month, but I am broke and the only thing I have is a 10 year old car so that I can get to my Doctor appts. My question is can they take my car? I live in Kentucky. Thank You.
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      See the Bills.com resource Collection Laws & Exemptions to see the exemptions for your state. You mentioned Kentucky. The vehicle exemption is $2,500, so if your vehicle is near or below that value, you need not worry about a judgment-creditor asking the sheriff to seize the vehicle and sell it at an auction. If the value of your vehicle is significantly higher in value than $2,500, then consult with a lawyer to learn what, if any, options you have to protect this asset.
      0 Votes

    • 35x35
      Jan, 2013
      christina
      I am on permanent disability. I want to know if a judgment against me is issued, can the judgment-creditor garnish or levy my bank account? Do I have to show up in court for the judgement? I live in Nassau County, Long Island, New York.
      0 Votes

    • 35x35
      Jan, 2013
      Bill
      Permanent disability status does not shield a consumer from judgments or the effects of a judgment.

      If you receive Social Security benefits, a pension, disability payments, alimony, unemployment benefits, or other assistance payments, New York's Exempt Income Protection Act (EIPA) may apply to you. Under EIPA, the first $1,716 of any bank account is exempt from debt collection. If the account receives any statutorily exempt electronic payment, such as Social Security, the exemption floor is $2,500.

      Consult with Legal Services NYC or a similar legal aid organization to learn more about your rights and liabilities.
      0 Votes

  • 35x35
    Nov, 2011
    I lost my job in May 2011. Consequently I had to quit making payments on my credit cards as the unemployment benefits are barely sufficient to pay my rent and utilities. The credit card companies keep calling and now a 3rd party collection agency has been calling. Should I declare bankruptcy? Can they garnish my CA unemployment checks?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Your unemployment benefits are not subject to garnishment, due to credit card debt. However, if any creditor obtains a court judgment against you, monies in your bank account could be taken through a bank levy.

      Before you decide on bankruptcy learn about options for debt relief. Start by reading Bills.com's valuable information about debt relief.
      0 Votes

  • 35x35
    Nov, 2011
    Jaimie
    My husband just paid off a settlement to a lawyer for a credit card debt, however the lawyer has the debt from Arrow Financial, which bought the debt from someone else. No one knows who owned the original debt, and we can't find any information on the credit report. There is another settlement that he is supposed to pay, but they won't tell him who it is for. What should we do next? How do we figure out who our money went to?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Validate the debt. A debt that cannot be validated may not be collected. The fact that the collection agent cannot tell you the source of the debt tells me it is unlikely it will be able to validate the debt.
      0 Votes

  • 35x35
    Oct, 2011
    Dan
    In your experience, what right, if any, do United States debt collectors have to pursue assets in other countries? For example, if I have 150k in credit card debt, and zero assets in the US...but well over 50k in cash assets in another country, can they sell the debt to a debt collector in that country, and possibly seize my cash assets there? Would you say there are any jurisdiction laws that govern such behavior?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      I have no experience with a collection account crossing international borders. My guess — note that deliberate word choice — is the non-US court would look at a US collection account with great curiosity, and may not recognize its legitimacy. What a non-US court would more likely understand is a judgment from a US court that the local court may domesticate in that country, assuming there are treaties between the US and the local country allowing judgment domestication. How does a consumer know if such treaties exist? Consult with a local lawyer who has international commerce experience. The other method is to use common sense. The US has close economic ties with its free-trade partners, for example, and virtually no ties with Cuba, North Korea, or Iran.
      0 Votes

  • 35x35
    Oct, 2011
    Jayme
    I have a few outstanding debts from early 2009 when I lost my job. I am working again and would like to remedy my debt and credit situation. The original creditors (Chase & HSBC) have charged off and sold the accounts to various junk debt buyers/collection agencies (Unifund, Main Street Acquisition, and Cavalry Portfolio). What are your recommendations on debt settlement? I have read a lot of feedback regarding contacting the original creditor, settling for a percentage with the original creditor or collection agency, requesting a credit report deletion upon settlement, etc. Thank you for your advice!
    1 Votes

    • 35x35
      Oct, 2011
      Bill
      See the Bills.com resource Negotiate Debt for tips and techniques in negotiating delinquent debt. The typical range for credit card debt settlement is 40 to 60 cents on the dollar. However, if the debt is particularly old, start negotiations at 15 cents on the dollar. One last thought: Negotiate a pay for delete.
      0 Votes

    • 35x35
      Oct, 2011
      Lucy
      Please understand that the debt buyers have zero control over any negative trade line placed on your credit report by the original bank. If you pay the judgments on your debts the debt buyer will move to satisfy the judgment against you and they should send you a paid in full letter referencing the original creditor, the credit card number, the case caption and civil action numbers. Once the judgment is paid it will be YOUR responsibility to alert the 3 credit bureaus that the judgment is paid in full. You'll want to send a copy of the paid in full letter with the satisfaction piece filed at the court. When a civil action is filed or a judgment is entered against you, the credit reporting agencies pick up that information and add it to your report. They do not update their records once the judgment is paid. If you live in a state where their are wage attachment laws, bank attachment laws or liens on your real estate, don't expect the debt buyer to settle your judgment for anything less than 50%. Do not send in any money to anyone without first receiving a letter outlining the settlement. The debt buyer and/or their attorney should send you something with language like "upon receipt of $XYZ, we will satisfy the judgment against you and send you a letter stating the debt originally owed to ABC Bank is paid in full". Never send in money without getting the deal in writing. All reputable companies and attorney's adhere to this practice. Good luck.
      0 Votes

  • 35x35
    Oct, 2011
    Jeff
    Hi I just recieved a letter from a collection agency for a Credit card debt from 17 years ago when I lived in South Carolina. As it is my understanding after 7 years the debt is considered a charge off. The credit card was for 300 - 500 dollars and the bill they are sending me is for 1582.28. My question is isnt the statute of limitations being held up or are they still able to collect the debt from 17 years ago?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Your misunderstanding of the law and the meaning of an accounting term is leading you astray.
      • Charge-off / write-off. An accounting term that means a creditor has moved an account from its current-accounts book to its general ledger as a bad debt. It does not mean the account is canceled or forgiven. See the Bills.com resource Charge Off for a more complete discussion of this oft-misunderstood phrase.
      • Seven Years. This length of time is how long a derogatory item can appear on a consumer's credit report file. It has nothing to do with charge off. It also has nothing to do with a state's statute of limitations. See the Bills.com resource Fair Credit Reporting Act to learn more about what can appear on a credit report and when.
      • Statute of Limitations. Just because a statute of limitations has passed does not mean a creditor may not collect a debt, except in Wisconsin. The passing of a statute of limitations gives a defendant in a lawsuit an affirmative defense, and nothing more. See Statute of Limitations to learn more.

      A collection agent working on an ancient debt may contact a consumer to attempt to collect an ancient debt (except in Wisconsin). It can even file a lawsuit against the consumer. However, as mentioned above, the consumer has an affirmative defense if there is such a lawsuit.

      0 Votes

  • 35x35
    Oct, 2011
    Jackie
    I just received a letter in the mail that I owe a jewelery store 4,000 but can settle for 2200. I found my original receipt the total amount charged was 1400. Keep in mind it was purchased in Sept. 05. I know that the statute of limitations is 6 years from when the account went delinquent. How do I determine the date it went delinquent, since I have never made a payment.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Typically, the statute of limitations clock for a debt either begins at the last payment, or when the payment was due. In this case, because you never made a payment, it is probably when the first payment was due.
      0 Votes

  • 35x35
    Oct, 2011
    Marc
    I just moved overseas after losing my job. I left behind a house that was underwater and about $50k in credit card debt. I am going to file for bankruptcy to clear up the situation I left behind. Will I have to show up in person to a court date or can I give someone a power of attorney to represent me? Also, do I have to file in the state where I last lived (Connecticut) or can I choose to file in another state?
    1 Votes

    • 35x35
      Oct, 2011
      Bill
      Consult with a lawyer in Connecticut who has experience in bankruptcy law to learn if the Connecticut court allows video conferencing.
      0 Votes

  • 35x35
    Oct, 2011
    Bonner
    In terms of the credit score, it is wise to have one single large account instead of number of small delinquent accounts. For any other program like debt settlement or debt consolidation, the opposite would be true.
    0 Votes

  • 35x35
    Oct, 2011
    Tony
    I'm drowning in debt due to a failed business venture. I currently earn $127,000 per year and support a family of 5. Including my house, I have debt of $418,000. $40K in credit card debt, a personal line of credit for $38,000, and another for $8,000.00. The amount of my bills have exceeded my monthly income. What can I do? If I stop paying on anything, what should it be? We have no equity in our home. It is underwater. Please help.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      See the Bills.com Debt Coach for a no-cost, no-gimmick, no-obligation consultation regarding your debt. You enter your debts into the Debt Coach tool, which analyzes your options, and gives you feedback on the costs and benefits of each option.
      0 Votes

    • 35x35
      Oct, 2011
      Derek
      You have several options, but a consultation with you would help determine which option is best for you. good luck
      0 Votes

  • 35x35
    Oct, 2011
    Ken
    Following a job loss, I'm contemplating defaulting on around $25,000 in credit card debt. Since I'm at an age (57) and circumstances (unemployed, living abroad off withdraws from a small retirement account) there are few downsides. I don't even have a phone creditors can call to hassle me. However, I still own a house in the US, which I rent out, and wonder if creditors can put liens on it or monkey with the bank account I use for it. It strikes me as crazy for this to happen, since I have zero equity in the house and at best it only breaks even. Heck, if I could sell it, I would! But I'd still hate to lose it. Meanwhile, given my circumstances, I couldn't afford to show up to court if a creditor sued or to file bankruptcy, so I'm stuck with whatever happens in my absence. Plus, I'm not sure how the house would figure in a bankruptcy. Since I don't live in it, I don't think it qualifies as an exclusion. But on the other hand, I don't live anywhere in the US, and if I did move back, I imagine I would live in the house. Anyway, I'd hate to fetch my forwarded mail one day only to learn that I've lost my house or the bank account into which the tenant deposits rent isn't paying the mortgage.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      If a creditor sues you and gets a judgment against you, your bank account could be at risk for levy. A judgment-creditor could also have a lien placed on your assets, including your home. If you don't have equity in your home, I don't see how your home would be at jeopardy, if you were to file for bankruptcy, but you need to consult with an attorney to get legal advice.

      Your best course may be to try to save up what you can and negotiate settlements with your creditors. Also, make sure that you can access your mail, so you are kept informed of all communications that creditors send you.
      0 Votes

  • 35x35
    Sep, 2011
    Brad
    Hello, my question involves the filing of a lawsuit by creditors. In your experience, how long does a person have between non-payment and the filing of a lawsuit? I've heard that after 6 months, banks sell it to collectors, and sometimes they file right away, and sometimes they don't. Would you say that making at least a small payment of 50-100 bucks will keep them from filing? (Even though my total minimum payments are well over 1000 dollars/month)
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      See the Bills.com resource If I Pay a Small Amount on My Debt, Can I Be Sued? to learn more about this urban myth.

      Some creditors will waste no time in filing a lawsuit against a delinquent debtor. Others will wait until a moment before the statute of limitations is reached before filing. I cannot predict if or when a creditor will file a lawsuit.
      0 Votes

  • 35x35
    Sep, 2011
    Bob
    I tailored this letter (http://imageshack.us/photo/my-images/163/creditcardform.jpg) I found on the Internet to my needs and haven't heard from the same collection company more than once. I defaulted on $15k in cc debt when I lost my job. The non-stop threatening calls stopped the day I got confirmation the company received it my letter (Signed Return Receipt). I donated a hundred bucks to the guy since he saved me thousands in lawyer fees. I gave this to many with similar results. Doing nothing will not work, they will still take you to court if you don't respond.
    2 Votes

    • 35x35
      Jun, 2012
      Drannin
      I liked your letter! Did it really work?
      0 Votes

  • 35x35
    Sep, 2011
    Janet
    I am 76 years old and have been paying Chase 171.00 per month. I live strictly on Social security and now find that with oil heat, medicine, food and doctors visits I can no longer meet this payment. I owe less than 5,500.00. What can happen should I default on payments?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      As the article stated, the account will go into charge-off status and collection efforts will ensue. A creditor can choose to sue you. Social security income can't be garnished by a credit card company, even if it obtains a judgment against you. If your sole source of income is social security and lack assets, you may be beyond the creditor's reach. It depends on what state you live in, what assets you have, how much you have in your bank account, and if you get your social security deposited directly (which you should do).
      0 Votes

    • 35x35
      Sep, 2011
      Van
      Personally I would stop paying, after first phone call send them a "cease & desist" letter. Be sure it includes all future contact via mail. Your social security is protected from creditors. Your credit score will take a hit. Make sure you have another credit card to use for emergencies.
      0 Votes

  • 35x35
    Sep, 2011
    Jimmy
    Hi Bills.com, thanks for the wonderful information! Back in 2008 I bought a house, and the house went underwater, and I lost my job for about a year. During that year, I used my credit cards, cash advanced about $60k to pay for the mortgage and other bills. The house was sold for a huge loss. Since then I have been getting collections calls non-stop. Today I got a letter saying that I'm being sued for breach of contract for the credit cards. What can I do at this point? What is the best thing to do? I am working now but I will not have enough money to pay for rent and all these credit card bills.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      See the Bills.com Debt Coach for a no-nonsense, no-gimmick, no-cost assessment of your debt resolution options. The neat thing about Debt Coach is it gives you your individual costs of each option so that you can decide which is right for you.
      0 Votes

  • 35x35
    Aug, 2011
    Bobbi
    Several years ago, I took out a large ($33,000) unsecured line of credit to consolidate bills. The interest rate is now nearly 30%, my payment is huge ($800), and I am not making any headway on the principal at all. The company is not willing to work with me on interest rate/payment reduction because I'm not delinquent. I am considering stopping payment on the account and letting it go several months delinquent so they will perhaps settle with me for a much lesser amount. My primary question is that this is also the company that holds my mortgage. Will they be able to do something negative to my mortgage account because of this, or are those two separate entities?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Whether a default on your unsecured loan can affect your mortgage depends on the language in your mortgage loan and your unsecured loan agreement.
      I suggest that you have both reviewed by an attorney, before you stop paying on your unsecured loan, defaulting on your payment obligations in order to induce a settlement.
      0 Votes

  • 35x35
    Aug, 2011
    Jennifer
    Over four years ago, I fell behind on my credit card and stopped paying for 3 months. The credit card company set me up with a plan to pay 440.00 per month. I still owe over 12,000 but my student loans are coming due and I cannot afford the 440.00. Is there a law in Pennsylvania where you only have to pay old debt for a certain amount of time?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Your legal obligation to pay a debt can expire over time, but the clock starts running after you stop paying on it. If you keep paying on it, the debt is never going to expire due to the statute of limitations.

      Try to negotiate a lower payment with the creditor. Pennsylvania has strong protections for your wages. Even if the creditor were to sue you and get a judgment, your wages should be free from attachment, though your bank account could be at risk.
      0 Votes

  • 35x35
    Aug, 2011
    Abhay
    I had some credit card debt as everyone else. There was an argument between me and the debt collector. I did pay off some of it even though I had migrated to a different country but later could not afford to. I am applying for immigration and will need a PCC form USA. Any chances this will appear in the Police Clearance Certificate? Or pose a problem to get it? I'm in need of urgent help. please help
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      US immigration does not consult the consumer credit report agencies (the credit bureaus) when determining whether a person is a security risk or a is otherwise worthy of visiting or residing in the US. The debt you mentioned falls in the civil courts, and the police clearances concern criminal matters, such as arrests and criminal convictions.
      0 Votes

  • 35x35
    Aug, 2011
    Lee
    I have several Credit Cards that I can no longer afford to pay on. Up to now all of them have been up to date but now I can no longer handle even the minimum payments. I am disabled and now only receive Social Security earnings and nothing else. I have used up my entire life savings and even money I had from my disability settlements. I have 3 major credit cards HSBC Dicover Card, Sears Master Card, Citi Bank Master Card. Total Debt is about $ 15,000 I also have a Target Store Card $ 850.00 and a Paypal Buyer Credit with GE finance. $ 500.00 I spoke with a consumer credit counseling company who can't help me out with a payment program because my earnings aren't enough. With my Car payment, Cell phone and medical insurance and car insurance I don't have the income. Anyway the lady suggested I just stop all payments and not pay on anything. What can be done to me? I know that Federal Laws protect my Social Security Wages from being garnished and I have no other assets. I don't own a home or anything of value. Everything I have belongs to family or friends. Please let me know of this type of God Awful situation. Thanks so much for having this site. Lee
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If you don't have assets and your income is protected from garnishment, then the most serious consequences of defaulting on your payment is collection calls, the threat of legal action, and a potential bank levy. If your bank account contains only your social security funds and you always have less than two times the amount of your monthly award in the account, then a bank levy should not be a problem either.

      I agree with the debt counselor. Your creditors may be willing to settle your debt, starting about six months after you default. If you have the means and wish to settle, that is certainly an option. You can also keep in mind that the debts will eventually expire, if you stay in the same 'no asset, income safe from garnishment' position. How long it takes for them to expire depends on the statute of limitations for debt in your state.
      0 Votes

  • 35x35
    Aug, 2011
    Cathleen
    We will probably be in financial trouble in about 8 months. My husband has worked hard for almost 30 years and I feel most of the bad decisions were mine and I do not want to ruin his credit or have liens placed on his paycheck. (I made the mistake of following the advice of the "financial experts". I moved my pension to a Roth Ira right before the stock market crashed. We had serious damage to our house in Hurrican Wilma in 2005. In 2007 we took out an equity loan to cover repairs, you know protect our greatest asset. Then our houses value was slashed 50% so we are now underwater. Then the credit card companies started raising my interest rates and paymnets even though I have never been late on payments or never not paid anything! I am very discouraged and angry at the entire financial community) On most of my cards my husband is just an additional user. If I remove him from the cards can they garnish his wages for credit cards that are only in my name? My daughter is also on one of my cards as an additional user - can they go after her? I thank you for your help in sending me in the right direction, there is a lot of hysteria out there.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      There are two classes of credit card users. One is an authorized user. Despite what a collection agent may say, an authorized user has no legal liability to repay the balance of the credit card. The credit card issuer may not file any legal action against an authorized user. However, if the card becomes delinquent, then the authorized user's credit score will suffer.

      The other class of credit card users are joint account holders. Joint account holders have legal liability for the balance due. Joint account holders can be sued if the account becomes delinquent.

      Consult with the Bills.com Debt Coach, for a no-nonsense, no-cost, no-gimmick on-line review of your debt issues. The Debt Coach application will analyze your situation, and show you your options and the costs and benefits of each debt resolution approach.
      0 Votes

  • 35x35
    Aug, 2011
    Lena
    I defaulted on 4 credit cards in 2008 and 2009 as I couldn't get work and couldn't keep up the payments. The total was about $60k. I didn't do it all at once. I kept trying to pay them, but after awhile it became impossible. I'm currently job hunting and would like to know what looks worse on an application: bankruptcy or credit card default? I spoke to an attorney friend in 2009 and he advised against bankruptcy (I didn't have the money to do it anyway) because medical bills are the number one reason for bankruptcy and I had no medical insurance at the time. I recently got medical insurance, so I'm wondering if I should file for bankruptcy now or if that would start the clock ticking all over again. It's already been 2-3 years since I defaulted on my cards, so I assume those will fall off my credit record in a few years (how long, I don't know). Mostly I'm worried about getting a job with such a bad credit rating.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Few employers check the credit reports of their applicants. If you seek a job where you will have a fiduciary responsibility, such as a comptroller, or if you seek a job that requires a security clearance, then by all means focus on rebuilding your credit score at all costs. However, if you want just a normal, everyday job, then building your credit score should not be your paramount concern. I suggest you try the Bills.com Money Coach, for a no-cost, no-gimmick, real-time analysis of your debt resolution options, including bankruptcy.
      0 Votes

  • 35x35
    Aug, 2011
    Eric
    First off great site! I recently defaulted on a credit card (CHASE). It was $8500. After numerous phone calls for months, I finally got an offer to pay off the debt for $4250 in the mail. This got me interested so I called and settled for two payments of $2200. They were very helpful on the phone. Now, I have about another $10,000 of debt with the same company, on three seperate cards. Is it possible that I default on those cards to settle for %50 of the debt?? Or is it going to look bad on my part from the credit card company considering I just settled for a previous debt? Thanks!
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      To the contrary, if a person at the credit card issuer who watches your accounts (which I doubt), they probably wonder when you will default on the other accounts and will negotiate a lump-sum settlement. If you are in financial distress, then consider default and a settlement. If settling the $8,500 account gives you enough breathing room in your budget to pay off the other accounts in full, then do so as quickly as you can. Doing so will help undo the damage to your credit score that you caused when you defaulted on the $8,500 account.
      0 Votes

  • 35x35
    Aug, 2011
    holly
    I am having trouble paying my medical bills from having my son last year. I just recently lost my job in the last 2 weeks, we had downsized just about everything. got rid of our cable, switched vehicle insurance and got rid of my cell phone. my husband can not help me with my debts because he is dealing with his and I don't expect him too. where can i go to get financial help?? The hospital that I filed for assistance with denied me. Any help towards an answer would help me out. thanks.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If you spoke to the hospital about financial assistance before you lost your job, then contact them again and explain your new, more dire financial circumstances.

      You can look into any sources of public assistance. See if you are eligible for food stamps, for instance. Check with both state and local governments, to see if there are any programs that assist with utility costs. Consider having a garage sale, if you have anything to sell. Perhaps you can make some money, until you find another job, by taking care of another child while you watch your son.
      0 Votes

  • 35x35
    Jul, 2011
    Dee
    My wife has 10K of debt on her one and only card. She can no longer pay. She doesn't have any assets and has no paycheck as of now. I am willing to get an unsecured loan of 5K from my credit union and offer a final settlement to the credit card company. Would they consider settling for half? And if so, how would I approach them?
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      Creditors are generally reluctant to settle a debt that is not delinquent. I think your wife would have to cease making payments, before the creditor will consider a settlement. How much the creditor may be willing to accept depends on many factors, such as who is the creditor and your wife's financial income and assets.

      If she does not continue to make the payments and the two of you decide to try to settle the debt, I think she is best off starting her negotiations at a lower amount than 50% of the debt. She has to keep in mind that a creditor can refuse to settle and pursue a lawsuit.
      0 Votes

  • 35x35
    Jul, 2011
    Anne
    Bill, I am a 70 yr.old woman. My husband is 75. I have 50k in credit card debt. I have been making my payments on time and have never missed a payment for 3 yrs. I get $1,100 a month in social security. My cc pmts. run more than I get so I have been using my savings to make up the difference. I have exhausted my savings and will have to default. I do have a piece of land that I have been trying to sell for 3 yrs. that would pay off my cc's. My plan now is to default then lower the price of my land so it will sell. Then I will try to negotiate with each cc company to pay a lump sum and get rid of them. I don't want them to know that I have this land so that they won't attach it before I can get it sold. How many months do I need to default before they will negotiate a lump sum? Also, what percentage of the balance is typical for the cc company to take. Say, will they take $5,000 on a $20,000 debt? I need to know this so I will know how low I can go on my land. At this point in life I am not concerned about my credit score. Also, can they lien my home. It is in both my husband and my name.Thank you so much. You are helping lots of people.
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      Land ownership records are public, so unless the land is titled in a corporation's name or in a trust of some kind, it would not take much time or money for a diligent and motivated judgment-creditor to learn you own one property on your own and another jointly. The key phrase in my previous sentence is "diligent and motivated" — not all judgment-creditors are, but I am getting ahead of myself.

      If you default today, you will endure 90 to 120 days of frequent telephone calls from the creditor's front-line call center reminding you to make a payment. After that date, the creditor will either sell the collection account to a collection agent for pennies on the dollar, or move your account to a second-line call center. With either, you can start to negotiate a lump-sum settlement. This negotiation period can last a day or three years — it really depends on the amount due, the creditor's policies, and random chance. Typical settlements range from 15 to 85 cents on the dollar. The most typical results are from 40 to 60 cents on the dollar. Again, the numbers I just offered are ranges and averages, and your creditor might be particularly hard nosed, or not. The number you mentioned is possible but optimistic.
      0 Votes

    • 35x35
      Jul, 2011
      Anne
      Bill, both our home and the land is jointly owned and my husband is not on my credit card's. So can either property be liened?
      0 Votes

    • 35x35
      Jul, 2011
      Bill
      If both of you are on the title to your property, then a lien filed against either one of you individually will encumber your property.
      0 Votes

  • 35x35
    Jun, 2011
    Jeremy
    OK I've read everyones posting on here, I want to know what you think. I'm going to paint you 2 examples: 1) Someone steals your credit card, buys 10 grand worth of jewelry and sticks your bank with the bill 2) I, Jeremy, use my credit, purchases 10 grand worth of jewelry, and plan on on making 6-7 payments before stopping, and sticking my bank with the bill. Any District Attorney will clearly pursue Example 1, but are there any criminal ramifications in Example 2? It's not so clear, theres no intent to cheat, I "attempted" to make payments before defaulting, and I'll simply file bankruptcy in a few years if they keep bothering me. Tell me what you think.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Fraud is classified as a specific intent crime. If the district attorney produces credible evidence to a jury that the defendant intended to commit the crime of fraud, then the jury may find the defendant guilty. The standard for proving civil fraud is lower, but the basic elements are the same.

      In the hypothetical you shared, you rather cavalierly stated you could file for bankruptcy. That may not be possible, thanks to the consumer-unfriendly changes in the bankruptcy code in 2005. Who passes the chapter 7 means test depends on their financial circumstances.
      0 Votes

  • 35x35
    May, 2011
    Kevin
    Hey guys, thanks for providing a very cool website, with lots of valuable resources, much appreciated by those of us that are in debt over our heads. My question for you is this: A few years ago when credit was booming I applied for a bunch of personal and business credit cards. In the online application, there was no income verification...it was simply "stated" or "stated income". So even though I only made 40k a year, I put down 150k in annual income...and was approved for a substantial credit line. Now that I'm in default on all these credit cards, do you think the lenders could pursue charges for lying on a credit card loan application?
    1 Votes

    • 35x35
      May, 2011
      Bill
      You described what the law calls, "fraud." My guess, note that word choice, is the bank is more interested in finding a way to minimize its losses than pursuing a civil fraud case against you.
      0 Votes

    • 35x35
      Jun, 2011
      Kevin
      Hello, thank you for your reply, I would hope that it is indeed considered civil fraud and not criminal fraud. How do lenders distinguish between the two? I didn't go out and buy a Ferrari, but I suppose some of my purchases might be considered a tad exotic. I would like to know so I can be best prepared to deal with these lenders.
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      A private individual can pursue a civil case against another person or an organization. A district attorney or federal prosecutor decides whether to file criminal charges against someone. A victim can argue to a DA that criminal charges should be filed, but it is up to the DA or prosecutor to make that choice. For example, Bernard Madoff was charged with criminal fraud by a federal prosecutor because he took much money from and lied to many people. I am not suggesting that you need to be Bernie Madoff to be charged with criminal fraud, but in my humble opinion, it will take more than misstating your income on a credit card application to catch the attention of a DA.
      0 Votes

  • 35x35
    May, 2011
    Carlos
    Nice article, couple questions on bill collectors. 1. I have about 60k in credit card debt, and about 15k in cash in my checking account. I took the 15k cash and wrote a check to my brothers mortgage (paid down his balance) since theres no quick and easy way to dispose of 15k in cash. Will the collectors try to go after my brother for the 15k? Would they be so bold as to seize my bank records and figure out where the money went? 2. Can you advise on where we can find good debt negotiators? All the lawyers I've spoken with deal only with bankruptcy, and I have no intention of going that route. Thank you.
    0 Votes

    • 35x35
      May, 2011
      Bill
      Two questions, two answers:
      1. Let us say for the sake of argument that you give money to a relative, and then are later sued, and the plaintiff wins a judgment against you. I am not aware of any state where the judgment-creditor can either on its own or by force of law cause a judgment-debtor to unwind a judgment-debtor's gift to another. (What I am about to say is outside of the scope of your question, but in a bankruptcy situation, a bankruptcy trustee can unwind such a gift.)
      2. Regarding finding a good debt negotiator, the best I know work in the debt settlement industry. Click on the link I just mentioned to be put in touch with a debt resolution provider, or read Debt Settlement Advice to resolve this debt yourself.

      One other thought: See the Bills.com Debt Coach to learn your options for resolving the credit card debt you mentioned.

      0 Votes

  • 35x35
    May, 2011
    Christ
    I got a summons today for a debt of about $1000. I am a college student who doesn't have a job or a car or anything else that I could sell so I really have absolutely no way to pay this debt and all this legalese is confusing. Is there any advise you could give me or anything you know of that I could do. I feel like there are bigger fish to fry than someone who had a $500 credit card that they couldn't pay for anymore.
    0 Votes

    • 35x35
      May, 2011
      Bill
      Creditors seem to file lawsuits against debtors randomly. By that I mean, some debtors I know with large balances are ignored, while people with small balances are targeted. The Bills.com resource Served Summons & Complaint does a better job of answering your question than the content on this page. Ask any follow up questions you may have on the page I just mentioned.
      0 Votes

  • 35x35
    Apr, 2011
    Sam
    Love this article, truly fascinating and helpful to those seeking credit card advice. 2 questions for you guys: 1. Say we have a $50,000 unsecured line of credit. If we were to purchase televisions, vacations, cars, all in a month or so....and stop paying the next month...can that be considered fraud? 2. If so, would it be more civil fraud or criminal fraud? Been receiving several different types of answers from attorneys....no one seems to know. Would love to hear from you. -Sam
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      The answer to your question will vary by jurisdiction and the facts. If the consumer applies for a line of credit with the intention of never repaying it, completes a bunch of purchases, and never makes a payment, then the district attorney may have enough evidence to prove a case of fraud. Most district attorneys, however, do not have the time to prosecute fraud cases.

      Regarding civil fraud, that too is a jurisdiction-by-jurisdiction question.
      0 Votes

  • 35x35
    Mar, 2011
    Marlon
    I have a judgment against me from a credit card company from about 15 years ago. I was working for myself for the past ten years, but had a garnishment on my wages the last time I was an employee. If I start working as an employee again, can my wages be garnished again?
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      How long a judgment stays in force depends on the state you live in. Also, in some states, a judgment can be renewed, if the renewal takes place before the judgment expired. You can view a chart bills.com prepared that lists how long a judgment stays in force in each state. The chart does not specify whether or not a judgment can be renewed, so speak with an attorney in your state to find that out.
      0 Votes

  • 35x35
    Mar, 2011
    doug
    we live in NC and have 3 credit cards with high outstanding balances. on one we owe $39K, the other is $14K and the third is $9K. our total monthly payment for all 3 is around $1200. we have been paying on time for almost 2 yrs. we are self employed and currently have no income coming in on the business. we are actively looking for employment for me and my spouse. if we were to let the credit card payments go into default, would our wages (on future jobs/employment) be garnished or is bankruptcy more of an option? we have rental property that we break even on (with mortgage pmts. and rent income), and we plan on keeping these properties. the credit card pmts. are the biggest issue on our debt and did not want to incorporate all properties in a bankruptcy. What are my options? Please advise.
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      I recommend that you consult with a bankruptcy attorney in your area, to hear whether or not you qualify for bankruptcy and what assets and debts need to be included or can be excluded from the bankruptcy. You asked if you could be garnished or suffer collection efforts, if you default. You can, indeed, but not until after a creditor sues you and obtains a judgment against you.

      You can also look into a debt settlement program. Debt settlement makes sense only if you can afford the monthly payment the settlement program requires.

      Read the Bills.com resource North Carolina Collection Laws for an overview of the rights and liabilities of North Carolina residents.
      0 Votes

  • 35x35
    Mar, 2011
    Basil
    Thanks for your advice to everyone here as they navigate this challenging time. My question. Due to a drop of cash flow by 65% in my small business, I have gone through all of my savings and retirement to keep up payments to credit cards and mortgage. Business has started getting better, but there's still not enough to meet commitments, and I'm now several months behind on cards (even after closing them and reducing payments on plans set up last year) I also have a fairly large debt to my business venders. I'm considering selling the house, with the idea of first covering my business debts to venders. How much damage to this process can the courts do if cc companies pursue me that way? Can I be forced to pay them instead, due to a lien? I would consider bankruptcy, but in that it would appear I would be forced to pay both venders and credit cards down in some ratio. This won't work for venders and a bankruptcy status would hurt and might even force me to close my business. With few well paid jobs available and kids to feed, I'd rather not close my biz, especially now that things are slowly improving. Also, can cc companies through courts take a lien on my business (sole proprietor) in some way (I rent the building), or garnish what I pay myself?
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      I assume you have equity in your home, which you would use to become current in your business debts following the home's sale. The only way a court could force you to pay Creditor B instead of Creditor A is if your creditors petitioned to file an involuntary bankruptcy. That is well within the rights of the credit card issuers, however, it is not a remedy I see them take. The credit card issuers use wage garnishment, account levy, and occasionally liens to collect delinquent debt. However, lightning strikes, and just because credit card issuers rarely do something does not mean it is 100% certain they will not do so in your case.

      Consult with a lawyer in your state who has experience in contract law or debt law. You did not mention how your business is organized (sole proprietorship, partnership, some form of corporation) that may be relevant. Also, an attorney who reviews the facts in in your case in person can give you more precise advice regarding your question about bankruptcy.
      0 Votes

  • 35x35
    Mar, 2011
    Brittany
    I'm a 21 y.o. single mother. I defaulted on a $5500 credit card debt a couple of years ago. They are offering to settle for $2700 which I would love to do but I still don't have the lump sum cash as I basically live paycheck to paycheck with govt. assistance. And I have no one to borrow from. What incentive is it to pay it anyway? It's still going to be on my credit report. Should I just take my chances that the SOL in NC will lapse? Thanks for any ideas.
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      Your incentive to pay or settle the debt is two-fold. The first is to prevent the debt from degrading into a state where the collection efforts by the creditor lead to your bank account being attached or having wages garnished. In North Carolina, wages are strongly protected from garnishment by unsecured creditors, so you should be free from threats of wage levy.

      The second issue is the impact on your credit. Once the debt is paid or settled, it will show on your credit report as an account with a $0 balance. This will help your credit score.

      The statute of limitations for a credit card debt in the state of North Carolina is three years. You could attempt to take your chances and see if the SOL is reached, but it seems the creditor is likely to sue you, given where things stand now. Also, SOL issues are tricky. Some credit card agreements contain a choice of laws clause, which can result in a different state's SOL rules applying other than North Carolina's. You should consult with an attorney in your area to fully understand the exposure you have to potential creditor efforts. Lastly, try negotiating a settlement that is structured into monthly payments.
      0 Votes

  • 35x35
    Feb, 2011
    James
    Hey Bills.. Divorced here. My good name on credit she used cards and never paid balances as she promised. One income now and no way to pay.... defaulted on total of 4 cards total 7,500. 3 of 4 are now at the collection firm level. Is there ever a way to negotiate with them and make an offer that they will put in print where I can pay the debt down and have it gone?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      There can be serious consequences to credit card default, so delay is not your ally. Contact your creditors and maintain open communications with them. You can certainly try to negotiate reduced balance payoffs. Please read the debt settlement advice bills.com offers, which will help you work on procuring settlement offers from your creditors. If you have any follow-up questions, please post them on that page.
      0 Votes

    • 35x35
      Feb, 2011
      carlos
      Hello Bill, My question may hard to answer for you as its not related to US, but i am sure you extensive knowledge will help me too. I am from Peru(South America), I have debt of almost $20000 using different credit cards plus about $12000 is a home loan which until now we are paying. One point, home loan and credit card debits is shared me me and my wife name.. means we are under debit from 6 different banks (credit cards) where 3 are mine and 3 from my wife. We are moving to Canada, can't pay this debit at all and leaving every thing as it, this included home name of me and my wife, which has been paid almost %50. my questions are as following.... 1- would that cause any problem in our future life while living in Canada? 2- Would peruvian creditors able to find us even in Canada? 3- We have plan to continue paying our home loan, just in case an issue because of credit cards, would that effect our home too? 4- what are the maximum limits peruvian creditors can go while we are not in Peru and has no plan to come back near future. thanks a million as advance.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      I wish I could offer assistance to you. My assistants and I have studied US law and as a result know enough about British common law to be dangerous. We have no understanding of the laws of Peru, and any observation we would make about your situation would be no more than a guess. The smartest thing I can say is to suggest you consult with a lawyer in Peru who has experience in consumer law. I realize this is not the answer you were seeking, but I would rather give you a sincere non-answer than guess and lead you astray.
      1 Votes

  • 35x35
    Jan, 2011
    Eric
    Hi, Thanks for your outstanding advice. I live in Sydney, i am 250000K in credit card dept which i cannot pay for to pay back. I am working. I am conscious that my fico achieve will take a huge hit for non-payment. 1. what is time period in it? 2. In Sydney , what is the past of court case ?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      I don't understand your questions. There is no definitive time period during which your credit will be poor, if you default on $250,000 in debt. How your credit will be affected, in large part, depends on how you resolve your debt. If your question was asking about Australian court cases, that is outside my area of expertise; you will have to consult an attorney in Sydney.
      0 Votes

  • 35x35
    Jan, 2011
    Marine
    Hello, and thanks in advance for any insight you may have on my question. I left the US 4 years ago. At that time I had a small credit card debt. Times were a little rough while looking for work in Spain so I continued to use the card but would also pay it off (if sometimes irregularly). 2 years down the line, I stopped using the card and shortly thereafter, stopped making monthly payments. Salaries here are low and each bank transfer would cost me $30. I didn't feel good about it but knew it was my only option. I have no existing financial ties in the US anymore (NY), closed baks accounts and the only trace of my existence is that I recently renewed my driver's license with a family member's address. I also send in my tax return every year as required of every amercian citizen. Now, a letetr has arrived at my parent's from a law firm. I assume I am being sued by the collection agency and I am not quite sure how to deal with it. The guilt is there but mainly, I can't afford to pay this thing off so here are my questions. I am pretty much certain I won't be returning to the US to live and certainly not before the SOL. Do they have legal recourse in Spain to collect any monies? Can my family be harassed? Is there still time to negotiate a 1 time lump sum payment (I can really only afford 25% of the $9000 debt if that)? Thanks.
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      You mentioned that your debt will eventually expire due to the statute of limitations. Each state has a statute of limitations for collecting on a debt. However, it is possible for a creditor to 'toll' a debt, if the debtor has left the country (and sometimes, even the state). Tolling stops the time from running on the expiration of the statute of limitations, so the debt may be still alive when you return to the US. Also, a creditor could sue you, obtaining a default judgment against you. The length of time a judgment stays in force varies from state to state. The creditor technically could pursue you internationally, though it may choose not to do so, due to the time and costs involved. Your family cannot be harassed about a debt in your name. The debt collector can only contact your family in an attempt to locate you and cannot discuss your private debt issues with your family. I think that negotiating a reduced settlement is a great idea. I suggest that you contact them, explain that you are living overseas making a modest living and may be able to borrow some money from your family, if the debt is reduced significantly. Don't send any money without first obtaining a written letter that your payment settles your debt in full.
      0 Votes

  • 35x35
    Jan, 2011
    Lee Anne
    My fiance was listed as an authorized user on one of his mother's cc and we have since found out that it was charged off in 2006. We are trying to buy a house and improve his credit score. Will it make a difference to his FICO score if he is removed from the account? We also have a cc company that is insisting that he is a joint card holder and not an authorized user even though he was added to the account when he was only 17. They insist that his mother must have lied and they refuse to remove him from the account. Is there anything else that we can do?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      If you can get your fiance removed from his Mom's account, on which he is currently an authorized user, the account should no longer show on his credit report and his score should improve. Regarding the card he is listed on as a joint user, is it possible that the account was opened when he was 17, but that he was made a joint cardholder sometime after he turned 18? You may want to speak with an attorney, to see if any legal action could compel the credit card issuer to sever him from the account. Lastly, I suggest that your fiance takes independent steps to improve his credit score.
      0 Votes

  • 35x35
    Jan, 2011
    Virginia
    A summery judgement was granted to Capital One for my credit card. It was less than what I owed. Can Capital One go back to the same judge and ask for more money? Can the summery judgement be changed?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      It is not possible to offer an observation regarding your situation without reading the judgment. Consult with an attorney in your state who will read the judgment and advise you accordingly.
      0 Votes

  • 35x35
    Dec, 2010
    steve
    My wife and I have accrued $14,000 in debt. We have been making payments on time, but with added bills being added into the mix, we cant afford to pay everything and still have money for food/gas/etc. We now have a couple bills from a trip for my wife and daughter to the ER and we are also paying off the IRS due to her ex-husband screwing us. Starting in the beginning of 2011, her student loans will kick in and that'll be another $300/mo. We already just break even without her student loan. Last pay period we ended with $9.00 in our account, and of course, all CC's are maxed out. If anything else comes up, we will be completely screwed. In case of an emergency, we have no savings/emergency fund. And if any new bill arises(like her student loan), we will not be able to pay everything. Something has to go unpaid, but I don't want to have to do that.
    0 Votes

    • 35x35
      Dec, 2010
      See the multi-page Bills.com document Debt Relief Options to learn more about your rights, liabilities, and options for resolving your credit card and medical debt.
      0 Votes

  • 35x35
    Nov, 2010
    I defaulted on 5,000$ credit card in Canada. Problem is I was visiting the US and ended up meeting my now husband and having a child. I cannot work here (do not have permanent residency), cannot make it back to Canada for lack of funds and also because of my baby. I have no idea if the credit card company has tried to contact me because my address was my parents and they up and moved across the country last year. It has been 10 months since my last payment. What could happen? Also my husband and i are planning on returning to canada in the near future (he is an american) and he doesnt have any bad credit. after he establishes himself and say he wants to apply for a mortgage will my default affect him? Also my last name is changed now too. So basically the credit card company has zero information about my whereabouts and if we moved it would be all the way across the country.
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      Please see the Bills.com resource Canada Bankruptcy to get a glimpse of one possible resolution to your Canadian debt. The reader comments on that page are especially helpful and relevant to your question.
      0 Votes

  • 35x35
    Nov, 2010
    Jared
    I had about $30,000 in credit card debt (5 cards) in 1999 when I was offered a job overseas. When I first moved, I tried making my payments from abroad. After a couple months, I gave up and went into default. My last payment was in November 1999. After that, the collection agencies could not track me down since I was no longer in the U.S. I am not planning to return to the U.S. in August 2011. 1) Am I right to assume that my credit history should no longer show my defaulting on my credit cards? 2) Can the collection agencies come after me now or has the statue of limitations run out?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      1) If you defaulted in late 1999, then the clock ran out on the date when the debt could be reported by the credit reporting agencies in mid-2006. This date is separate and independent from the statute of limitations. 2a) Yes, a collection agency that owns this collection account can pursue you in the courts or privately in all jurisdictions except Wisconsin. 2b) The statute of limitations for pursuing this debt has expired in all jurisdictions except Ohio. (See the Bills.com resource State Statutes of Limitations.) Even if the statute of limitations has expired, the collection agent can file a lawsuit against you to collect the debt. However, if you raise the statute of limitations defense in a timely manner, the court will dismiss the case. As mentioned, even if the statute of limitations has expired, the collection agent can pursue you privately in all states except Wisconsin.
      0 Votes

  • 35x35
    Nov, 2010
    Dale
    I have $42,000 debt on a card outstanding since 2007, when I left the country. I have permanent residence in my new country, no assets or accounts in the US and no reason to return. My question may sound immoral, but I guess I want to know if doing anything about this is a practical issue for me or purely a moral decision. So firstly, is there anything they could do that could reach me where I am (EU)? The only thing I can think of is whether an employer here does a international background check, so then my next question is whether US creditors can "force" me into bankruptcy in the US, which would go on my record and be visible to international checks I might consent to. Thanks.
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      See the Bills.com resource Domesticate a Judgment Overseas to understand the basic civil procedure issues at hand. The resource I just mentioned concerns a student loan, but the basics are the same for student loans, credit card debt, medical bills, a deficiency balance, and so on. Ask any follow-up questions you may have on that page.
      0 Votes

  • 35x35
    Oct, 2010
    dee
    I paid all but $5,000 of nearly $25,000 to BoA then I lost my job, a year ago, and couldn't pay the rest. They will settle for half but I don't even have dime, I just have a part-time $500 a month job.
    0 Votes

  • 35x35
    Sep, 2010
    Chris
    Hi Bill, I got behind on a credit card that was through my bank and now it is in collections. Can my bank pull the money from my bank account? I am currently unemployed so my income is definitely not going to be enough to cover any settlement amount they will probably offer. What are the chances that it could go to court? The amount is ~$5000.00.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    Whether or not the bank can seize funds from your bank account to cover money you owe the bank for an unpaid bank-issued credit card debt depends on the 'fine print' in the terms of your account. I would not wait to find out the reach of the bank's authority, if I were you. I recommend that you take the money out and either put it into a new account at a separate bank or put it in the proverbial cookie jar. As to the chances that your debt could end up with you being taken to court, it certainly is possible. After removing your money from the bank, call them and discuss your hardship, explaining your financial hardship and see if they offer you any flexibility.
    0 Votes

  • 35x35
    Sep, 2010
    Bill
    The first step I would take is to speak with the bank and find out the source of the bank levy. It is crucual to know to whom the debt is owed and how large the underlying debt is, as the bank account (or other accounts) could be hit again and the debt could lead to a wage garnishment. While a creditor needs to obtain a judgment before a bank levy or wage garnishment can take place, that is not the case regarding at tax debt. The IRS and state tax authorities do not need to obtain a judgment, though they are required to send a warning, a Notice of Intent to Levy, before the levy or garnishment takes place. That does not mean that the tax authoritiies have to ensure delivery; they send the notice to the last address they have for the taxpayer. It may be helpful for your friend to read the Bills.com page about judgments and garnishments.
    0 Votes

  • 35x35
    Sep, 2010
    Maria
    friend got 1800 taken out of his account without warning on a bill that was 5 months late...is this legal? He called the bank and they said they were searching for other assets as well and they will take those also even if at a different bank. Can they do this without a judgment?
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Negotiate a lump-sum settlement with the judgment-creditor. Consult with the links I mentioned for tactical advice.
    0 Votes

  • 35x35
    Aug, 2010
    Brian
    I defaulted on a credit card and it went to litigation. The courts ruled in their favor. It's been over four years since then. How can i resolve my debit to the company named in the suit.
    0 Votes

  • 35x35
    Jul, 2010
    julie
    If I default on a BofA credit card about 18,000. that is only in my name will they be able to go after any marital assets. I plan to continue paying the other 3 smaller more manageable debt,however, since Bof A told me straight out that they wouldn't even call me back to discuss options to manage this, since it was current, I don't see any other choice, Great business practice huh???
    1 Votes

  • 35x35
    Apr, 2010
    Bill
    You mentioned pesos, which leads me to conclude your debt is not in the US. Consult with a lawyer in your area who has experience in debt.
    0 Votes

  • 35x35
    Apr, 2010
    ronir
    hi, i need some advice because i have 2 credit credit cards that has the standing balance of 35,000 pesos for the one and 34 for the other. since my salary is only minimum,i had planned to default my standing balance. now, i am not planning not to totally not pay may balance, what i really wanted is to pay the standing balance and not only the interest which is 3,000 a month. i know i can pay the balance on monthly basis. its just so hard for me to cope up because the balance which is almost 70,000 pesos will never change since only the interest of it has to be paid. so out of anger and hopelessness i indeed really planned to default it for me to have time to express my side or ask some help from the credit company. thus, is my plan a right one? please help
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    "Universal default" is banned under the Credit CARD Act of 2009. Therefore, if you were defaulting on credit card at Bank A, and were current on a card at Bank B, then Bank B would not be able to default under the new law. However, your situation is different in that both of your credit cards were issued by Bank of America. I see nothing in the Credit CARD Act that would prevent your bank from closing both accounts if you default on one. However, that does not mean that is what Bank of America will do because I have not read your credit card agreements. I suggest you review your agreements and look for the phrases "universal default" and "right of offset." The right of offset allows a creditor to remove funds from a client's account if the customer defaults on a payment.
    0 Votes

  • 35x35
    Feb, 2010
    Kenny
    Hi Bill, I have two credit cards from the same issuer (BofA). I was unemployed for a few months, so both balances ran up, but I am only able to handle one of these accounts now that I am back working. I need the one credit card to still be active because I travel 90% of the time and this is how I secure hotel and rental purchases. My question is, if I defaulted on one (FIA thru BofA), but kept the other active (BofA Visa), will they cut off both accounts or allow me to continue to keep the one active?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Contact the creditor and explain the situation. Negotiate. Ask if your LLC's account can be put into a hardship plan. Regarding your personal credit, as long as you set up, funded, and operated the LLC properly the LLC's creditors will not be able to pierce the corporate veil and reach into your personal finances. Those are big ifs, and only you can answer the question honestly.
    0 Votes

  • 35x35
    Feb, 2010
    Scott
    Hi Bill, I have a credit card which was issued to my LLC business in 2003. It has never shown up on my personal credit report. At $32,000 owed and 25% interest, I am not able to make any payments due to other bills. Will the issuer cut me a break? Should I be worried about personal credit? I will pay this when work picks up but what to do in the meantime?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    It is probable that bankruptcy can extinguish the judgments if they are related to a consumer debt. Consult with an Oregon attorney who has experience in bankruptcy. He or she will be able to review your documentation in person and give you a more precise answer. See also Advice on Bank Levies by Judgment Creditor.
    0 Votes

  • 35x35
    Feb, 2010
    darrin
    Hi Bill I live in oregon. Got sick a few years ago. then the market fell,lost my job a year ago then the bills are pileing up I tell the creditors I cant pay what I dont have.To no avail got 2 jugdements against me now,and looking at forclosure soon I believe. Will a bankruptcy help with the judgements in place or to late. thank you
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Consult with a lawyer in Ottawa who is experienced in consumer law, who will advise you in detail on the treaties that exist between Canada and the countries in Asia you are considering. These treaties govern the circumstances and procedures for domesticating Canadian debt in foreign countries.
    0 Votes

  • 35x35
    Feb, 2010
    Sonia
    Hi Bill, Iam going through a very difficult situation in Ottawa, Canada. I can no longer pay my debt amounting to $ 110,000 originating from 7 different credit cards. Iam left with no options but leave back for my country and never return back. Please advise me if the collections agencies or law suites may chase me in Asia. Thanks for you help
    2 Votes

  • 35x35
    Jan, 2010
    Bill
    There is no "marital credit score" or merger of credit scores when people marry. If you alone are on the contract for the credit card, and she is not an authorized user, then your delinquency on this card will have no effect on her credit score. However, if she is an authorized user, remove her as an authorized user immediately so that as this account goes bad it does not drag down her credit score. See an answer I gave a fellow reader who had a similar question but with the situation reversed: Will My Spouse's Bad Credit Affect My Credit Score? Although the facts are slightly different from your situation, the concepts and analysis underlying my answer will help you understand your situation. See also Is My Spouse Liable for My Credit Card Debt?
    0 Votes

  • 35x35
    Jan, 2010
    Tom
    My wife and I have accrued 25k in credit card debt.All the cards are in my name,will the CC companies be able to affect my wife's fico score,or take any action against her?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    "Garnish" is the legal term you are looking for. Please see the Bills.com resource Garnish Social Security Income for more information.
    0 Votes

  • 35x35
    Jan, 2010
    Sallie
    A credit card company raised my interest rate to 30%, then closed my account. I have not sent a payment to them in over five months and have tried, unsucessfully, to negotiate a settlement with them. I live on a pension and income from social security. My question is: can they attach my pension and/or social security payments?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    If you are a head of household in Florida, 100% of your wages are exempt. If you are a non-head of household, 75% of your wages are exempt from garnishment. See State Consumer Protection Laws and Exemptions for more information.
    0 Votes

  • 35x35
    Jan, 2010
    Juan
    Hello Bill, I am being sued over a credit card I defaulted on in the state of Florida. I was unemployed for over year and accrued most of the debt in this time as I was living off the card. I am now working and earn $700.00 a week and the amount in default is $7000. My question is, what is the worst case garnishment scenario the court might impose? Thanks
    1 Votes

  • 35x35
    Dec, 2009
    Bill
    Creditors can domesticate a judgment in another country assuming the countries have a treaty allowing such. I am far from an expert in international law, but it would surprise me greatly if Canada and Australia had no such treaty given their common heritage. For a definitive answer you need to find Australian attorney who has experience in domesticating Canadian judgments. Start with The Australian Bar Association and then move on to the local bar association Web sites to see a list of lawyers and barristers in Australia.
    0 Votes

  • 35x35
    Dec, 2009
    Joyce
    My partner and I are moving to Australia. We have about 32K of credit card debt in Canada. If we default on this debt, can the creditors come after us in Australia?
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    You friend needs to develop a plan for resolving her debt. See What are my debt resolution options? to learn about her options, and Collections Advice to learn more about her rights regarding the collections process.
    0 Votes

  • 35x35
    Dec, 2009
    MIRNA
    I HAVE A FRIEND THAT IS GOING THROUGH DIFFICULT TIMES, SHE OWNS A CAR AND MAKES HER MORTGAGE PAYMENTS, BUT BECAUSE OF THE ECONOMY SHE HAS GOTTEN BEHIND ON CREDIT CARDS, THE CREDIT CARD COMPANIES WILL NOT LOWER PAYMENTS AND INSTEREST RATES...IF SHE WERE TO JUST MAKE HER MORTGAGE PAYMENTS AND LET CREDIT CARDS GO UNPAID...CAN THEY COME AFTER HER HOME? FORCE TO SELL? SHE IS A SINGLE MOM WITH NO OTHER INCOME DUE TO HER EX-HUSBAND BEING UNEMPLOYED.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    Please see Garnish Social Security Income and Garnish Pension to learn more about Social Security and pension garnishments. See Collections Advice to learn more about your rights in the collections process.
    0 Votes

  • 35x35
    Dec, 2009
    Daniel
    My wife & I live in Oregon. Our only income is two small pensions & Soc. Security & Disability. Our Credit Cards are goin up from 7 % to 30 % with no apparent reason. I can't even afford Medicare at age 66. I we default on our CC can they come after out pension & Social Security Checks?
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    Glass half-empty or half-full? With three creditors, are your chances three times greater for a lawsuit than if you had one creditor? Or is each creditor less likely to sue given they are owed smaller amounts? Again, you need to analyze each debt and creditor alone. Each creditor will analyze your history, the amount of debt, and apply those to the creditor's policies. If you work out a payment plan with the creditor your chances of being sued are tiny. If you shut-down all communications with the creditor your chances of getting sued are much higher. Ignoring the debt will not make it go away. Develop a plan for resolving it. See What are my debt resolution options? and Collections Advice to learn more.
    0 Votes

  • 35x35
    Dec, 2009
    sameer
    Thank you,, yes $150 000. My score FICO is already low cos of the debt to credit ratio now of 100%, I was at 800 until late 2008. Also, considering the record number of cc / mortgate delinquencies as a result of the economy, wouldn't it take a few years before a case actually went to court? And I have a debt of $ 90 000 with one cc, 40 000 , 20 000. Would this split make a difference in the outcome? ie chances of being sued. Thank you Sir.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    I assume you meant to write you have $150,000 in credit card debt, because if you really meant "150000K" that would equal $150 million, which would probably be a record for credit card debt. Still, even in Texas, $150,000 in credit card debt is a large amount. I do not want to speculate on your odds of being sued because every creditor has different criteria for making that determination, and every situation is different. For example, your chances of being sued are higher if you made large purchases or cash withdrawals before defaulting, which would lead the creditor to conclude you intended to defraud the company as opposed to just falling on hard times. I am not aware of any difference in the credit card companies' rate of lawsuits by state, so I do not know if Texas has a higher rate of lawsuits than the other jurisdictions. Regarding the drop in your FICO score for defaulting, that is difficult for me to say without knowing your credit score before your default. If your score was in the 700s, you can expect it to drop more than 100 points. If your score was already in the 500s, then a default's impact will be less.
    0 Votes

  • 35x35
    Dec, 2009
    sameer
    Hi, thanks for your excellent advice. I live in TX, i am 150000K in credit card dept which i cannot afford to pay back. I am employed. I am aware that my fico score will take a massive hit for default. 1. For how long? 2. In TX , what is the history of litigation like? and do most creditors sue here?
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    You can buy a house -- not today -- but sooner than you think. First, go to AnnualCreditReport.com and get a free, no-obligation copy of your credit report. Second, review Collections Agencies, Collections Laws and Your State's Statute of Limitations to understand if your derogatory entries are about to roll-off your credit report. If so, the passage of time alone will help in the repair of your credit score. Third, read FICO Score Calculation to see how to boost your credit score. I recommend getting a credit card from your bank or credit union, or get a secured credit card. Make small charges and pay the balance early. Fourth, review your credit report again after the derogatory items are scheduled to roll-off your report to make sure they do. Finally, dispute any errors on your credit report, including derogatory items that are more than seven years old. The Federal Trade Commission provides a comprehensive guide to disputing items on your credit report.
    1 Votes

  • 35x35
    Nov, 2009
    Kristen
    Dear Bill, My husband and I have under 10,000 in un-secured, and medical debt. All of which we have defualted on about 5 years or more ago. There were 3 credit cards, and various medical debts. We have been renting for 7 years, never late on payments to bills and rent. We saved up and bought our car outright, we do not, and have not had any credit cards for 5-6 years. We have three children and are talking of buying a house. Is this even possible? Our credit is prolly so bad at this point we wouldn't qualify for a loan at all, OR it would come with a HUGE interest rate. We were told that most of our debt is close, or past the statute of limitations for years in default, and that after 7 years it would be taken off our history. Is this true? Do we have a chance at a home or is it a pipe dream?should we clean up the debt or wait for the rest to clear off the history report and rebuild from there if that's possible? We currently live in Oregon state, but all the debt was accrued in Wa. state. Any advice would be helpful! Thanks!
    1 Votes

  • 35x35
    Nov, 2009
    Bill
    To learn what will happen to your credit score if you default on your credit cards, see FICO Score Calculation. A credit card (or any account for that matter) can be considered in default the moment you miss or are late on one payment. However, credit card companies will usually give customers with consistent payment history a grace period before considering their account in default. According to generally accepted accounting principles, an account is no longer current if there is no payment after 120-180 days. To learn more about charge-off, statute of limitations, and how long defaulted accounts appear on a credit report, read Charge Off, Credit Report, Statute of Limitations & Merged Creditors.
    0 Votes

  • 35x35
    Nov, 2009
    Antonio
    Sorry Bill, I'm from Peru, and regarding long term plans, I do not close de possibility to come back to the US under a working visa again once the economy gets better, but I am not thinking in coming back to the US in the near future. If I just stop paying my credit cards, what is the damage on my credit? and how long it takes for the credit officials to marked as a default? Also, I heard that after 7-10 years all that credit informations goes away, is that true? Once again, thank you.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    You did not mention your home country, so I cannot say for certain what is your worst-case scenario. In theory, US creditors may have the right to domesticate the debt in a debtor's home country and initiate the collections processes that are allowed by the debtor's country's court system. In practice, the chances of this happening depend on the laws of the debtor's home country, how much the debtor owes, and how easy it is to locate the debtor. One thought to consider is your long-term plans. You may wish to return to the US in the future, and it will be easier for you to get credit in the future in the US if you resolve the debt now. See What Are My Debt Resolution Options? to see what you can do to resolve the debt.
    0 Votes

  • 35x35
    Nov, 2009
    Antonio
    Hi Bill, I've been living in the US for 9 years, first with a student visa, then a working visa, but due to the economic situation my sponsor for the work visa have decided no to extended any more. Then, I've been forced to leave the country next year, now, I have a credit card debt of 15K among 3 credit cards, what is the worst case scenario?because I've decided to stop sending any payment to the banks. Thank you for your help
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    You have options other than default or bankruptcy for resolving your unsecured debt. See What Are My Debt Consolidation Options? Default is not a long-term solution. See Collections Advice to see some of the consequences of defaulting on an unsecured loan, so I think you should eliminate that option from your thinking. Bankruptcy can be an effective solution if you qualify. See Advice on filing chapter 13 bankruptcy with home equity to start learning more about bankruptcy. Regarding your question about credit scores, you already understand your credit score is going to decrease. The question is not which debt resolution option you choose is most damaging to your score, but how long your score is damaged. The answer is complex and varies by each person. If you can show positive activity on other credit accounts, your score will rebound relatively quickly. If you can't stay current on other accounts, the fall-out will linger for a longer period. See FICO Score Calculation to learn more about how your credit score is calculated, and the steps you can take to improve it.
    0 Votes

  • 35x35
    Nov, 2009
    Monica
    Is a good credit score really the Holy Grail of achievements we once valued it to be? Considering that so many good intentioned American families (and many more to come) are in serious financial peril and have devasted their credit standings just trying to survive these days, will there be any lienency in the forgiveness cycle by the big institutions in the near future? These are extrodinary times. Consider our situation. In late 2007, we borrowed 150K on a ELOC to specically pay for a remodel we had been planning for years. We budgeted exactly what we needed nd borrowed that amount after getting multiple bids from General contractors. We awarded the contract and commenced construction immediately upon funding. March 2008, the institution that we had the Equity Line with, froze our account not letting us use it anymore. The reasoning was stated as "declining property values in our area". We still had another $60K+ needed to complete the project. We opted to pay the remaing contractor's fees etc on our fantastically convenient low interest rate credit cards. We had no credit card debt at the time and impeccable FICO scores. We thought it would be simple to refinance in a month or two and just roll it all into a new mortgage. We were incorrect. We have been paying relegiously on these cards trying to always pay more than the minimum pymnt req.d. We have been rewarded with steadily increasing rates and a reduced available credit limit everytime we get a chunk paid off. My husband and I are both college educated, professional commissioned salesmen for large well established American companies. Sales have tanked and we are now making 2/3 of what we used to make.His company even put into effect a 10% salary decrease across the board to delay mass lay offs. We are maxed out credit wise and have no access to credit if there were to be some type of family emergency. Money is so tight and we have trimmed every scrap of fat off our spending just to attempt to make ends meet and are still not quite making it every month. We are considering defaulting on our credit cards. Kissing what's left of what's now a compromised credit standing behind. This is a paradigm shift for us. We want to keep our home and cars and protect our 8 year olds Education IRA, our 401Ks and Roth IRAs. (who knows if we'll have Social Security when its our time to retire) Is bankrupcy any less of severe judgement by the once revered credit reporting companies than say just defauling all together on making anymore payments on these cards???
    1 Votes

  • 35x35
    Nov, 2009
    Bill
    The answer to your question is "neither." You have options for dealing with the unsecured debt (the credit cards) and the mortgage debt. It is not an either/or decision -- you can resolve both sets of debt simultaneously. First, read What Are My Debt Consolidation Options? to understand your options for resolving the unsecured debt. Second, go to the Home Affordable Refinance Program home page and start the process of renegotiating your mortgage. Now is a good time for you to work on reducing your mortgage payment. Create a plan for resolving both sets of debt, work the plan, and you will emerge from your predicament intact.
    1 Votes

  • 35x35
    Nov, 2009
    athena
    Hello, I really need some advice. Basically my question is: would it be worse to foreclose on a second home or just stop paying some of my credit cards? I just cant keep up with both, on top of the mortgage for the house I am currently living in. Story: I'll try to be brief:). 5 years ago I was living in another state. I wanted to keep the house as an investment. Unfortunately shortly after I moved it flooded and was damaged to the tune of $20K. I kept hoping I would someday have the money for repairs but to date I have not been able to save a penny, though I have not missed a single mortgage payment. In the meantime various unfortunate circumstances have arisen which have resulted in the accumulation of about $50K of credit card debt spread over 8 cards. When the APR's were at a reasonable rate, I was able to slowly chip away at this debt. However, over the last several months, they have all raised the APR's to the range of 15-25%, making it impossible for me to pay anything more than interest! Something has to give. Currently I am paying $800/month for the mortgage for the damaged, unrentable house and about $1000-$1200 /month for the credit cards. I woke up in a cold sweat last night when I realized I cant keep doing both. So back to my question..which would be worse? to let the house foreclose? or to default on the credit cards? Please help!
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    First, default can do a great deal more than "tarnish" your credit score. Second, default will create more than a "few" annoying phone calls. Third, debtors who default face wage garnishment, levy of their bank accounts, and liens on their property. See Collections Advice for more information on the rights of creditors and debtors.
    1 Votes

  • 35x35
    Oct, 2009
    Mark
    hello - Since credit card default merely tarnishes my credit score and gives me a few annoying phone calls, why shouldn't I just default on $50k worth of charges, and keep the goods ? For $50k worth of free merchandise, which I won't pay for, it appears to me that credit-card-default is a simple option ! mark ondrake "buy more, pay less"
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    Credit scores are calculated using a proprietary formula. Therefore, it is impossible for anyone to say with certainty how much one event will increase or decrease your credit score. To learn more about how credit scores are calculated, see FICO Score Calculation.
    1 Votes

  • 35x35
    Oct, 2009
    Debbie
    If I default on my credit cards but continue paying my home and car. How long will it take to repair my credit
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    You need to look carefully at the documentation for the credit cards. If you are a co-signer on the cards -- in other words, a joint account holder -- then you are responsible for the balance due on those accounts. However, if you are merely an authorized user then you have no liability. Assuming for the sake of argument that you are a joint account holder, the fact that you have a divorce decree signed by a judge declaring that your ex-spouse is responsible for the credit cards means next to nothing for the credit card companies. The credit card companies have a contract with you and your ex-spouse and unless or until a judge orders that the contract are changed, the contracts' terms remain.
    2 Votes

  • 35x35
    Sep, 2009
    Terry
    Hi Bill, What about this scenario - My husband and I are divorcing. He is "taking" all the assets and all the debt. However, after agreeing to that he defaulted on about $97,000 in credit cards (spread across about 6 cards.) I am an authorized user on the cards, not the primary card holder. I have been getting calls on the 2 B of A cards. Is it likely they will proceed with actions to collect from me? Is there any way to protect myself? He also let 3 of our rental properties go to foreclosure and didn't pay the property taxes, HOAs, water bill, etc. 2 of the properties have my name on the loan papers, so I have received collection letters. If the properties are sold they are upside down so there will be outstanding debt due the bank, the county for the taxes, etc. How can I protect myself against being held responsible for his decisions on these matters?
    1 Votes

  • 35x35
    Sep, 2009
    Bill
    No one in the US has been imprisoned for debt since the Civil War. Do not believe legal advice from collection agents. Their advice is usually incomplete or wrong, and is always self-serving. See my answer to another reader for more information about the collections process: Collections Agencies, Collections Laws and Your State's Statute of Limitations.
    3 Votes

  • 35x35
    Sep, 2009
    Sue
    I have not been able to pay back a credit card that is now from approx. $2400.00 o approx. $7,000. I just received a letter stating that if I do not contact an attorneys office, a constable will arrest me to appear in court. This credit card was initially opened approx 5 yrs. ago. Could I really be arrested?
    7 Votes

  • 35x35
    Mar, 2009
    Bill
    No, retirement income is protected from creditor garnishment.
    1 Votes

    • 35x35
      Jun, 2011
      Craig
      Not completely true regarding garnishments of retirement funds. A recent child support garnishment took a sizable chunk out of my IRA. Not only did I have to pay the early withdrawal fee but I have to pay taxes on the amount as reported income.
      1 Votes

    • 35x35
      Jun, 2011
      Bill
      The problem with the word garnishment is that each jurisdiction uses it differently. When I think of garnishment, I think of an order to an employer (or payer) to skim off a portion of the payment and divert it to a judgment-creditor. Unfortunately, some jurisdictions do not agree with my definition (imagine that!) and use garnishment to refer to what I call an account levy, whereby a court orders a bank, credit union, or other financial institution to seize or freeze the assets of a judgment-debtor, and forward those assets to the court or a judgment debtor.

      Here, according to your description, the court ordered what I would call an account levy of your IRA for delinquent child support. It may have called the action a garnishment, however. Was the court in error for taking this action? Consult with a lawyer in your state who has experience in consumer law to learn more about your rights and liabilities.
      1 Votes

  • 35x35
    Mar, 2009
    dean
    If delinquent on credit card debt and card company sues, can they successfully attach social security and corporate pensions?
    10 Votes